DOCSLIB.ORG

Financial Economics (Econ 171A) Course Syllabus

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Financial Economics (Econ 171A) Course Syllabus Econ 171A Financial Economics (Econ 171A) Course Syllabus Yan Zhao Financial Economics Office: Sachar 107-1 (PHD room) Econ 171A [email protected] Fall, 2008 Office hours: Thursdays 3 – 5 PM or by appointment Current Draft: Aug 28 Fall, 2008 (Tuesdays and Thursdays: 5:10 am-6:30am) Course Description The path-breaking advances in finance theory and practice over the past decades have profoundly changed the financial world. These changes are further accelerated by the extensive globalization of financial markets and the rapid development in financial technologies in recent years. This course provides a rigorous introduction to the fundamentals of modern financial analysis and their applications to business challenges in capital budgeting, project evaluation, corporate investment and financing decisions, and basic security analysis and investment management. The course is lecture based. Lectures will consist of covering the theory, examples, and class discussion. Homework assignments will focus on applying the material from lectures. The major topics to be covered are: • The time-value of money • Introduction to financial instruments • Risk and return • Portfolio theory. • Capital allocation • Pricing models, such as the Capital Asset Pricing Model and Index Model • Market efficiency • Equity valuation • Bond pricing and the Term Structure of Interest Rates. • Derivatives - Pricing and Use Page 1 of 4 Econ 171A Course Description Readings REQUIRED: • Zvi Bodie, Alex Kane and Alan J. Marcus, Investments , 8th edition, ISBN: 0-07- 338237-X, McGraw-Hill. RECOMMENDED: • Robert J. Shiller, Irrational Exuberance, Princeton University Press; • Hull, John, Options, Futures, and other Derivatives, Pearson education. • Malkiel, A Random Walk Down Wall Street, 8th edition, W.W. Norton. • Wall street Journal. Course Requirements You are required to attend all classes, participate in class discussions, familiarize yourself with the policies on academic integrity (see below). You should also keep up with general financial news. This will be part of the basis of class discussion. Your grade will be based on class participation, attendance, in class review problems (short quizzes), problem sets, and the final exam. The final will be closed-book. Course grades will be determined according to the following weighting scheme: 10% Class participation 20% Problem sets 30% Quizzes 40% Final examination Disability If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please discuss the matter with me at the earliest possible time . Academic integrity You are expected to be honest in all of your academic work. The University policy on academic honesty is distributed annually as a section of the Rights and Responsibilities handbook. Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judicial System. Potential sanctions include failure in the course and suspension from the University. Page 2 of 4 Econ 171A Schedule of Lectures Introduction Introduction to Present Value calculation and statistics review Institutional Background BKM – chapters 1-4 Time Value of Money and the Price of Risk Risk Asset returns. Measures of risk. BKM – chapter 5 Portfolio Theory Diversification. Systematic risk and non-systematic risk. Portfolio theory. Efficient risk- return trade-offs. BKM – chapters 6-7 Capital Asset Pricing Model (CAPM) and Its Extensions The CAPM and linear risk/return trade-offs. Applications of the CAPM. Empirical evidence and extensions of the CAPM. BKM – chapter 9 Index Model Single factor security market and single index model BKM – chapter 8 Market Efficiency Efficient Market Hypothesis (EMH). Implications and empirical tests of the EMH. BKM – chapter 11 Valuation Common Stocks Discount Cash Flow Model (DCF). EPS, D/P, P/E, PVGO, and discount rates. BKM – chapter 18 Fixed-income Securities Fixed-income markets. Term structure of interest rates. Forward interest rates. Market conventions. Properties of bond prices. BKM – chapter 14-15 Page 3 of 4 Econ 171A Options Options contracts and basic properties. Valuation of options, binominal, risk-neutral pricing, Black-Scholes formula. BKM – chapter 20-21 Forwards and Futures Forward and futures contracts and prices. Hedging with forward and futures. BKM – chapter 22 Tentative chapter -Security Analysis Financial Statement Analysis BKM – chapters 19 Final Review Session General course review. Final Examination Page 4 of 4 .
Load more

Recommended publications
  • Mathematics and Financial Economics Editor-In-Chief: Elyès Jouini, CEREMADE, Université Paris-Dauphine, Paris, France; [email protected]
    ABCD springer.com 2nd Announcement and Call for Papers Mathematics and Financial Economics Editor-in-Chief: Elyès Jouini, CEREMADE, Université Paris-Dauphine, Paris, France; [email protected] New from Springer 1st issue in July 2007 NEW JOURNAL Submit your manuscript online springer.com Mathematics and Financial Economics In the last twenty years mathematical finance approach. When quantitative methods useful to has developed independently from economic economists are developed by mathematicians theory, and largely as a branch of probability and published in mathematical journals, they theory and stochastic analysis. This has led to often remain unknown and confined to a very important developments e.g. in asset pricing specific readership. More generally, there is a theory, and interest-rate modeling. need for bridges between these disciplines. This direction of research however can be The aim of this new journal is to reconcile these viewed as somewhat removed from real- two approaches and to provide the bridging world considerations and increasingly many links between mathematics, economics and academics in the field agree over the necessity finance. Typical areas of interest include of returning to foundational economic issues. foundational issues in asset pricing, financial Mainstream finance on the other hand has markets equilibrium, insurance models, port- often considered interesting economic folio management, quantitative risk manage- problems, but finance journals typically pay ment, intertemporal economics, uncertainty less
    [Show full text]
  • The Law and Economics of Hedge Funds: Financial Innovation and Investor Protection Houman B
    digitalcommons.nyls.edu Faculty Scholarship Articles & Chapters 2009 The Law and Economics of Hedge Funds: Financial Innovation and Investor Protection Houman B. Shadab New York Law School Follow this and additional works at: http://digitalcommons.nyls.edu/fac_articles_chapters Part of the Banking and Finance Law Commons, and the Insurance Law Commons Recommended Citation 6 Berkeley Bus. L.J. 240 (2009) This Article is brought to you for free and open access by the Faculty Scholarship at DigitalCommons@NYLS. It has been accepted for inclusion in Articles & Chapters by an authorized administrator of DigitalCommons@NYLS. The Law and Economics of Hedge Funds: Financial Innovation and Investor Protection Houman B. Shadab t Abstract: A persistent theme underlying contemporary debates about financial regulation is how to protect investors from the growing complexity of financial markets, new risks, and other changes brought about by financial innovation. Increasingly relevant to this debate are the leading innovators of complex investment strategies known as hedge funds. A hedge fund is a private investment company that is not subject to the full range of restrictions on investment activities and disclosure obligations imposed by federal securities laws, that compensates management in part with a fee based on annual profits, and typically engages in the active trading offinancial instruments. Hedge funds engage in financial innovation by pursuing novel investment strategies that lower market risk (beta) and may increase returns attributable to manager skill (alpha). Despite the funds' unique costs and risk properties, their historical performance suggests that the ultimate result of hedge fund innovation is to help investors reduce economic losses during market downturns.
    [Show full text]
  • From Big Data to Econophysics and Its Use to Explain Complex Phenomena
    Journal of Risk and Financial Management Review From Big Data to Econophysics and Its Use to Explain Complex Phenomena Paulo Ferreira 1,2,3,* , Éder J.A.L. Pereira 4,5 and Hernane B.B. Pereira 4,6 1 VALORIZA—Research Center for Endogenous Resource Valorization, 7300-555 Portalegre, Portugal 2 Department of Economic Sciences and Organizations, Instituto Politécnico de Portalegre, 7300-555 Portalegre, Portugal 3 Centro de Estudos e Formação Avançada em Gestão e Economia, Instituto de Investigação e Formação Avançada, Universidade de Évora, Largo dos Colegiais 2, 7000 Évora, Portugal 4 Programa de Modelagem Computacional, SENAI Cimatec, Av. Orlando Gomes 1845, 41 650-010 Salvador, BA, Brazil; [email protected] (É.J.A.L.P.); [email protected] (H.B.B.P.) 5 Instituto Federal do Maranhão, 65075-441 São Luís-MA, Brazil 6 Universidade do Estado da Bahia, 41 150-000 Salvador, BA, Brazil * Correspondence: [email protected] Received: 5 June 2020; Accepted: 10 July 2020; Published: 13 July 2020 Abstract: Big data has become a very frequent research topic, due to the increase in data availability. In this introductory paper, we make the linkage between the use of big data and Econophysics, a research field which uses a large amount of data and deals with complex systems. Different approaches such as power laws and complex networks are discussed, as possible frameworks to analyze complex phenomena that could be studied using Econophysics and resorting to big data. Keywords: big data; complexity; networks; stock markets; power laws 1. Introduction Big data has become a very popular expression in recent years, related to the advance of technology which allows, on the one hand, the recovery of a great amount of data, and on the other hand, the analysis of that data, benefiting from the increasing computational capacity of devices.
    [Show full text]
  • An Introduction to Financial Econometrics
    An introduction to financial econometrics Jianqing Fan Department of Operation Research and Financial Engineering Princeton University Princeton, NJ 08544 November 14, 2004 What is the financial econometrics? This simple question does not have a simple answer. The boundary of such an interdisciplinary area is always moot and any attempt to give a formal definition is unlikely to be successful. Broadly speaking, financial econometrics is to study quantitative problems arising from finance. It uses sta- tistical techniques and economic theory to address a variety of problems from finance. These include building financial models, estimation and inferences of financial models, volatility estimation, risk management, testing financial economics theory, capital asset pricing, derivative pricing, portfolio allocation, risk-adjusted returns, simulating financial systems, hedging strategies, among others. Technological invention and trade globalization have brought us into a new era of financial markets. Over the last three decades, enormous number of new financial products have been created to meet customers’ demands. For example, to reduce the impact of the fluctuations of currency exchange rates on a firm’s finance, which makes its profit more predictable and competitive, a multinational corporation may decide to buy the options on the future of foreign exchanges; to reduce the risk of price fluctuations of a commodity (e.g. lumbers, corns, soybeans), a farmer may enter into the future contracts of the commodity; to reduce the risk of weather exposures, amuse parks (too hot or too cold reduces the number of visitors) and energy companies may decide to purchase the financial derivatives based on the temperature. An important milestone is that in the year 1973, the world’s first options exchange opened in Chicago.
    [Show full text]
  • Challenges in Macro-Finance Modeling
    Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. Challenges in Macro-Finance Modeling Don Kim 2008-06 NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series (other than acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. CHALLENGES IN MACRO-FINANCE MODELING DON H. KIM∗ Abstract. This paper discusses various challenges in the specification and implemen- tation of “macro-finance” models in which macroeconomic variables and term structure variables are modeled together in a no-arbitrage framework. I classify macro-finance models into pure latent-factor models (“internal basis models”) and models which have observed macroeconomic variables as state variables (“external basis models”), and examine the underlying assumptions behind these models. Particular attention is paid to the issue of unspanned short-run fluctuations in macro variables and their poten- tially adverse effect on the specification of external basis models. I also discuss the challenge of addressing features like structural breaks and time-varying inflation uncer- tainty. Empirical difficulties in the estimation and evaluation of macro-finance models are also discussed in detail. 1. introduction In recent years there has been much interest in developing “macro-finance models”, in which yields on nominal bonds are jointly modeled with one or more macroeconomic variables within a no-arbitrage framework.
    [Show full text]
  • Course Information Sheet for Entry in 2018-19 Msc in Law and Finance
    24/10/2017 MSc in Law and Finance | University of Oxford Course Information Sheet for entry in 2018-19 MSc in Law and Finance About the course The MSc in Law and Finance is taught jointly by the Law Faculty and the Saïd Business School. It will provide you with an advanced interdisciplinary understanding of economic and nancial concepts and their application to legal topics. The MSc combines a highly analytic academic core with tailor-made practical applications derived from collaboration with professional and regulatory organisations. There are two core nance courses, Finance and First Principles of Financial Economics, a core interdisciplinary course, Law and Economics of Corporate Transactions, and one or more elective courses in law. There are also pre-sessional courses in maths and nancial reporting. In addition to these core MLF courses, students selecting the Law Stream will take two law electives from a tailored list of about 10 law courses that are available to students on the Bachelor of Civil Law (BCL). The list of law electives comprises courses that are business law-oriented and thus are intended to complement both each other and the MLF course as a whole. In taking these electives, you will be joined by students taking the Law Faculty's other taught graduate courses, the BCL and the Magister Juris (MJur). MLF students can also select the Finance Stream. If you select this option, you will take only one law elective. In lieu of the second law elective, you will take a mandatory nance course, Corporate Valuation, in the second term and one nance elective in the third term.
    [Show full text]
  • University of Pennsylvania the Wharton School FNCE
    University of Pennsylvania The Wharton School FNCE 911: Foundations for Financial Economics Prof. Jessica A. Wachter Fall 2019 Office: SH-DH 2459 Classes: Wednesday 1:30{4:30 Email: [email protected] Office hours: Wednesday 4:30{5:30 Course Description The objective of this course is to undertake a rigorous study of the theoretical foun- dations of modern financial economics. The course will cover the central themes of modern finance including individual investment decisions under uncertainty, stochas- tic dominance, mean-variance theory, capital market equilibrium and asset valuation, arbitrage pricing theory, option pricing and the potential application of these themes. Upon completion of this course, students should acquire a clear understanding of the major theoretical results concerning individuals' consumption and portfolio decisions under uncertainty and their implications for the valuations of securities. Prerequisites The prerequisites for this course are graduate level microeconomics (Economics 681 or Economics 701), matrix algebra, and calculus. The microeconomics courses may be taken concurrently. Course Material • The website for this course can be accessed through Canvas: https://canvas.upenn.edu. On this website you can find lecture notes, sample problems, announcements. • All readings are optional, but may be helpful. The textbook is C.F. Huang and R. Litzenberger, 1988, Foundations for Financial Economics, Prentice Hall. 1 On the syllabus, readings from the textbook are prefaced by HL. This textbook is out of print. You can find the chapters on the course website. • Following each topic, there is a list of recommended articles which can also be found on the website. Other reading Some excellent texts that cover material related to this course are: • K.
    [Show full text]
  • Financial History and Financial Economics
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Turner, John D. Working Paper Financial history and financial economics QUCEH Working Paper Series, No. 14-03 Provided in Cooperation with: Queen's University Centre for Economic History (QUCEH), Queen's University Belfast Suggested Citation: Turner, John D. (2014) : Financial history and financial economics, QUCEH Working Paper Series, No. 14-03, Queen's University Centre for Economic History (QUCEH), Belfast This Version is available at: http://hdl.handle.net/10419/96489 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu QUCEH WORKING PAPER SERIES http://www.quceh.org.uk/working-papers FINANCIAL HISTORY AND FINANCIAL ECONOMICS John D. Turner (Queen’s University Belfast) Working Paper 14-03 QUEEN’S UNIVERSITY CENTRE FOR ECONOMIC HISTORY Queen’s University Belfast 185 Stranmillis Road Belfast BT9 5EE April 2014 Financial History and Financial Economics*# John D.
    [Show full text]
  • Core Courses for the Master of Science in Applied Economics Program Courses Descriptions: ECON 6500
    Core Courses for the Master of Science in Applied Economics Program Courses Descriptions: ECON 6500 - Microeconomic Analysis This course covers microeconomic analysis applied to public policy problems with an emphasis on practical examples and how they illustrate microeconomic theories. Policy issues such as pollution, welfare and income distribution, market design, industry regulation, price controls, tax policy, and health insurance are used to illustrate the abstract principles of microeconomics. ECON 6510 - Macroeconomics Analysis This course covers applied macroeconomic models used by federal agencies to explain and predict economic behavior. Course emphasizes macroeconomic data: NIPA accounts, GDP, construction and application of CPI, labor force data, and economic indicators. Students will also study a selected set of current macroeconomic topics including models of economic growth, economic fluctuations, monetary policy, the Great Recession, inflation, and financial markets. ECON 6520 - Foundations of Empirical This course covers fundamental aspects of Research mathematical economics, data management and interpretation emphasizing sampling, descriptive statistics, index numbers and construction of aggregated variables. Students will learn basic probability theory and statistics. The course will include an introduction to multiple regression analysis using STATA statistical software. ECON 6530 – Econometric Modelling and This course covers refinements and Forecasting generalizations of multiple regression analysis. Topics can include: panel data methods, instrumental variables, quasi-experimental methods, time series analysis, limited dependent variables, and sample selection corrections. ECON 6540 - Financial Economics This course applies microeconomic theory and applied econometric techniques to the study of financial institutions and markets for financial assets. Students will learn how economists model and estimate the value of financial assets. The economic and empirical models are of interest to public policy makers and private wealth managers.
    [Show full text]
  • The Integration of Economic History Into Economics
    Cliometrica https://doi.org/10.1007/s11698-018-0170-8 ORIGINAL PAPER The integration of economic history into economics Robert A. Margo1 Received: 28 June 2017 / Accepted: 16 January 2018 Ó Springer-Verlag GmbH Germany, part of Springer Nature 2018 Abstract In the USA today the academic field of economic history is much closer to economics than it is to history in terms of professional behavior, a stylized fact that I call the ‘‘integration of economic history into economics.’’ I document this using two types of evidence—use of econometric language in articles appearing in academic journals of economic history and economics; and publication histories of successive cohorts of Ph.D.s in the first decade since receiving the doctorate. Over time, economic history became more like economics in its use of econometrics and in the likelihood of scholars publishing in economics, as opposed to, say, economic history journals. But the pace of change was slower in economic history than in labor economics, another subfield of economics that underwent profound intellec- tual change in the 1950s and 1960s, and there was also a structural break evident for post-2000 Ph.D. cohorts. To account for these features of the data, I sketch a simple, overlapping generations model of the academic labor market in which junior scholars have to convince senior scholars of the merits of their work in order to gain tenure. I argue that the early cliometricians—most notably, Robert Fogel and Douglass North—conceived of a scholarly identity for economic history that kept the field distinct from economics proper in various ways, until after 2000 when their influence had waned.
    [Show full text]
  • Department of Econometrics Department of Econometrics
    Department of Econometrics Department of Econometrics DEPARTMENT OF ECONOMETRICS The Department of Econometrics was established in July 1980. Since its inception, the Department has been specialising on teaching and research in quantitative economics, emphasising theoretical, methodological and conceptual aspects of economic theory along with econometric applications to socially relevant economic issues and policies. Quantitative analysis of economic data with computer applications has been the strength of the Department. Recognising the growing importance of quantitative economics in teaching and policy decisions, the M.A Econometrics programme in DEPARTMENT OF ECONOMETRICS 1978 along with the Ph.D. programme with a focus on applied econometrics. With the increasing demand for econometric analysis, UNIVERSITY OF MADRAS M.A. Financial Economics and M.Phil. in Applied Economics are also offered by the Department. The Department teaching focuses on training students in computer applications and econometric softwares to impart quality learning in quantitative analysis. The Department at present has 5 well trained faculty with specialisations in a wide range of topics. M.A. FINANCIAL ECONOMICS Dr. T. Lakshmanasamy, M.A., Ph.D. Professor and Head Dr. D. Sathiyavan, M.A., M.Phil., Ph.D. Associate Professor Dr. P. Mahendra Varman, M.S., M.Phil., Ph.D. Assistant Professor Dr. R. Mariappan, M.A., M.B.A., M.Phil., Ph.D. Assistant Professor SYLLABUS FOR 2017-18 The Department has an Air-conditioned Computer and Econometrics Lab with accessories and is equipped with licensed software such as Windows, Linux, MS Office and Econometric/Statistical software packages such as SPSS, STATA, LIMDEP, SHAZAM & Eviews. Course List & Syllabus 1 Course List & Syllabus 2 Department of Econometrics Department of Econometrics Eco C 201 Mathematical Methods 4 D.
    [Show full text]
  • Financial Economics 1
    Financial Economics 1 ECON 308-0 Money and Banking (1 Unit) FINANCIAL ECONOMICS The role of money, banking, and financial markets in the modern economy. Topics include: function and history of money, financial flows, kellogg.northwestern.edu/doctoral/programs/financialeconomics evolving nature of banks and their regulation, monetary policy, modern (https://www.kellogg.northwestern.edu/doctoral/programs/ central bank practices, effect of monetary policy on economic outcomes, financialeconomics.aspx) and the response to financial crises. Prerequisites: ECON 281-0, ECON 310-1, ECON 311-0. Degree Types: PhD ECON 309-0 Public Finance (1 Unit) The PhD Program in Financial Economics is offered jointly by the Understanding the role of government in the economy in theory and Department of Economics in the Weinberg College of Arts and Sciences practice. Topics include: structure and implications of various tax and the Department of Finance in the Kellogg School of Management. instruments, role of public debt, and methods for evaluating government The joint program requirements are a combination of those for the expenditures and programs. existing PhD programs in each departments. The program prepares Prerequisites: ECON 281-0, ECON 310-1, ECON 310-2. students for careers in college teaching and research, government and ECON 310-1 Microeconomics (1 Unit) international agencies, or private business. A more mathematically formal and rigorous treatment of the core Students will have access to a broad array of faculty across different concepts of microeconomics introduced in ECON 202-0. Topics include: disciplines within economics that taps into the interdisciplinary strengths consumer behavior and the theory of demand, costs of production and found within the Finance-Economics curriculum.
    [Show full text]